Tax rebates for small business still too low, says Sait

The largest body of tax professionals in the country says the proposals by the Davis Tax Committee for a R20,000 rebate for smaller businesses is still too low, as it covers only 30% of compliance costs.

The committee on Monday released an interim report on how to improve tax benefits and incentives for small and medium-sized enterprises (SMEs).

It recommended rebates of R10,000-R20,000, depending on the turnover of a business, as well as rebates for small businesses that did not have taxable income. These rebates would replace the incentive system for small businesses provided in the Income Tax Act, which the committee found to be too low.

But the CEO of the South African Institute of Tax Professionals (Sait), Stiaan Klue, said on Wednesday the proposed rebate was still "way too low" to properly compensate for the envisaged change and increased compliance costs.

According to Sait, research compliance cost for SMEs with a turnover of R1m ranges between R45,000 and R50,000 a year.

Sait technical adviser Erich Bell said important changes to reduce compliance from a value-added tax (VAT) perspective were also being considered.

"Delays by the South African Revenue Service (SARS) in timeously releasing VAT refunds have contributed to small businesses, which rely on refunds to maintain a positive cash flow, allegedly having to close down in some cases," he said.

To ensure that the long lead time for releasing VAT refunds is reduced, the report recommends that SARS establish a help desk or a communication channel to assist small businesses with the refund process. More stringent time limits for SARS to release VAT refunds are the long-term goal of the committee.

Two owners of small businesses spoken to on Wednesday welcomed moves to improve the way VAT is handled by SARS at the moment, as they were both growing increasingly frustrated.

They said they had been battling for two years to resolve VAT problems with SARS.

One said his problems related to a business that had been closed down, while the other said someone at SARS had incorrectly deleted his VAT input — if this amount had been included, it would have allowed him a substantial refund.

Research by the Davis committee revealed that it took small businesses, on average, 255 hours a year to deal with all tax compliance-related matters.

The committee called for "comprehensive separate lines of communication and offices for the SME sector".

Mr Bell also urged SARS "to adopt a consultative approach in all its dealings with taxpayers".

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